Income Tax (Earnings and Pensions) Act 2003 section 103A

Accommodation provided pursuant to optional remuneration arrangements: relevant amount

Section 103A sets out how to calculate the taxable "relevant amount" when an employer provides living accommodation to an employee through an optional remuneration arrangement (commonly known as a salary sacrifice or flexible benefits arrangement).

• The relevant amount is the higher of the modified cash equivalent of the accommodation benefit and the amount of salary or other earnings foregone in exchange for it
• If the modified cash equivalent equals or exceeds the amount foregone, the standard cash equivalent rules apply; otherwise, the relevant amount is the amount foregone less any deductible amount
• The deductible amount depends on whether the cost of providing the accommodation is above or below £75,000, and reflects sums made good by the employee and, for higher-cost accommodation, any excess rent paid
• If the accommodation benefit would normally qualify for an income tax exemption (but for the restriction on exemptions under optional remuneration arrangements), the modified cash equivalent is treated as zero, meaning the amount foregone will always be the relevant amount